Monday Market Moves | Week of 7 July 2025
Welcome to Monday Market Moves, the weekly series from Essex Capital Markets briefing you on Chicago commercial real estate capital markets. We cover key trends in CRE debt, refinancing, and capital structures to help investors, borrowers, and lenders navigate today’s evolving environment.
This Week: A New Legislative Landscape for CRE
President Trump’s “One Big Beautiful Bill Act”, signed July 4, 2025, represents a sweeping tax and spending package with broad economic aims. The 887-page law averts impending tax increases (by extending 2017 tax cuts) and introduces new incentives to “reignite investment,” particularly benefiting commercial real estate (CRE) sectors (bisnow.com). While positioned as the largest tax cut in U.S. history, it also includes major budgetary shifts – adding defense and border funding while cutting some domestic programs (bisnow.com). For CRE investors, developers, and borrowers, the law delivers a mix of tax relief, extended incentives, and policy changes that will shape strategy, financing, and development decisions. Below, we break down the key provisions and their implications, with a focus on multifamily properties.
100% Bonus Depreciation Restored (Full Expensing of Property)
One of the headline wins for real estate is the permanent restoration of 100% bonus depreciation. Businesses can immediately expense the full cost of qualifying assets (e.g. equipment, machinery, and certain real estate improvements) in the year placed in service (trepp.com). This benefit, first introduced in the 2017 Tax Cuts and Jobs Act, had begun phasing down (to 80% in 2023, 60% in 2024, etc.) and would have expired by 2027 (commercialobserver.com). The new law eliminates the phase-out and makes full expensing a long-term feature:
Immediate Write-Offs for Investments: Any qualifying CRE capital expenditures after Jan 19, 2025 can be written off 100% in the first year (kbkg.com). This includes personal property and land improvements often identified in cost segregation studies for multifamily projects (e.g. appliances, flooring, landscaping), allowing investors to accelerate depreciation deductions and boost after-tax cash flow early in a project’s life. As one industry CEO noted, having bonus depreciation permanent “is a huge, huge win for commercial real estate,” helping offset rising construction costs and interest rates by freeing up liquidity (commercialobserver.com)
Qualified Improvement Property (QIP): Qualified Improvement Property – certain interior, non-structural improvements to commercial buildings – remains a 15-year asset and thus eligible for 100% bonus depreciation as well (commercialobserver.com) . This means landlords upgrading office, retail, or hospitality interiors can deduct those costs immediately. (While QIP by definition applies to non-residential property, multifamily developers with mixed-use components or converting commercial space can also leverage this expensing on the qualifying portions.)
Development Timing: Because the benefit is realized when an asset is placed in service, the prior phase-down had made developers pessimistic about projects finishing after 2022. By making full expensing permanent, the bill provides certainty – a developer can plan a multi-year apartment build or heavy value-add renovation knowing the entire cost of shorter-life components (15-year or less) can be deducted in year one when the project is completed (commercialobserver.com). This significantly de-risks upfront investment in new construction and property improvements.
Section 179 Expensing Expanded: Complementing bonus depreciation, the bill doubles the cap on Section 179 expensing for small and mid-size businesses. Investors can immediately expense up to $2.5 million in qualifying property purchases per year (phase-out begins after $4 million in purchases) (claconnect.com). This enhancement (indexed for inflation after 2025) is especially helpful for smaller CRE owners – for example, a local multifamily operator can write off the cost of new equipment, appliances or roofing in a 10-unit building all at once, rather than depreciating over years (claconnect.com). It encourages reinvestment in properties by allowing more renovation and FF&E costs to be taken as an immediate deduction.
Why it matters for multifamily: These expensing provisions supercharge the tax benefits of real estate ownership. Cost segregation opportunities are amplified – a multifamily project can allocate a substantial portion of its basis to 5, 7, and 15-year categories (personal property and land improvements) and now deduct 100% of those categories in year one. This yields sizeable paper losses that can shelter rental income (or other passive income), improving after-tax returns and enabling faster pay down of debt or reinvestment. For developers, the ability to fully expense eligible project costs improves project NPVs and IRRs, making marginal deals more feasible and attracting capital even amid higher interest rates. Overall, restoring full bonus depreciation “makes CRE investments more attractive” by boosting near-term cash flow and investment liquidity (trepp.com).
Permanent 20% Pass-Through Deduction (Section 199A QBI)
The law provides tax relief for pass-through businesses by making the 20% Qualified Business Income (QBI) deduction permanent (bisnow.com). Under prior law, this 20% deduction for pass-through entity income (Section 199A) was set to expire after 2025, which would have significantly raised taxes on LLCs, partnerships, and S-corporations.
Stability for Real Estate LLCs: Most rental real estate businesses structured as LLCs or partnerships qualify as a trade or business under IRS rules, allowing rental profit to take the 20% deduction. By locking in the QBI deduction indefinitely (rather than letting it sunset), the bill ensures that real estate investors can continue deducting 20% of their net rental income each year (nationalmortgageprofessional.com). This effectively lowers the pass-through owner’s taxable income and improves yield. For example, a multifamily property generating $100,000 in net rental profit provides its owner a $20,000 deduction under QBI – a substantial tax savings now preserved going forward.
Enhanced Deduction for Small Business Growth: In early versions of the bill, lawmakers even discussed increasing the deduction to 23% for certain years (claconnect.com). While the final law keeps it at 20%, it expands the phase-in range and makes it permanent (trepp.com). The certainty of this deduction helps investors and developers confidently structure projects via pass-through entities (the prevalent structure for real estate) knowing that a chunk of the income will remain tax-sheltered. This favorably impacts valuations and the amount of cash flow available for reinvestment or debt service.
Main Street Benefits: The administration pitched this as helping “small businesses keep more money” (whitehouse.gov). For CRE, that includes countless small and mid-sized real estate firms – from family-owned rental portfolios to regional developers – who will benefit from the continued 20% write-off. It narrows the tax-rate disparity between pass-through entities and C-corporations, encouraging ongoing investment through pass-through structures (REITs aside). In effect, it boosts after-tax cash flow by lowering effective tax rates on rental income, which can support more aggressive growth plans and hiring (property managers, construction crews, etc.) in the multifamily (spacewhitehouse.gov).
Why it matters for multifamily: Multifamily assets are often held in pass-through vehicles, and many syndicators, family offices, and developers rely on this deduction to improve investor returns. The permanence of QBI means more predictable long-term tax planning – e.g., underwriting pro formas can safely assume the 20% deduction continues when projecting investor cash flows or fund distributions. This stability may also make refinancing or selling easier, as buyers and lenders can underwrite higher after-tax income. In summary, the QBI deduction’s extension is a direct boon to real estate entrepreneurs, reinforcing CRE as a tax-advantaged investment class.
Preservation of 1031 Exchanges and Capital Gains Deferral
Section 1031 like-kind exchanges – a cornerstone of real estate investment strategy – survived intact. The bill makes no changes to 1031 exchanges, meaning investors can continue swapping properties without immediate capital gains tax (nationalmortgageprofessional.com). This is critical for multifamily investors who often rely on 1031s to defer gains and reposition portfolios (for example, selling an older apartment building and exchanging into a larger or newer property tax-free).
1031 Exchanges Unchanged: Despite occasional proposals to curb like-kind exchanges, the final law fully preserves the ability to defer capital gains by reinvesting in real (estatenationalmortgageprofessional.com). There are no new limits or caps – investors can still exchange any size of property, and no recognition of gain is required as long as proceeds are reinvested per the rules. This continuity encourages ongoing transaction activity in the multifamily sector, as owners can trade assets and consolidate or upgrade portfolios without tax friction. It remains a “critical tool for scaling portfolios and preserving cash flow” in the industry (nationalmortgageprofessional.com).
Opportunity Zones Made Permanent: The Opportunity Zone (OZ) program, which offers deferral and partial forgiveness of capital gains for investments in designated distressed areas, was slated to sunset in 2026. The new law locks in Opportunity Zones as a permanent fixture of the tax code (bisnow.com), authorizing a second round of OZ designations from 2027 through 2033 with revised criteria. At least 33% of new OZ tracts must be rural (broadening geographic reach), and there are enhanced incentives for certain investments (e.g. a 30% basis step-up after 5 years for projects via specialized rural Opportunity Funds)(claconnect.com). Reporting requirements are tightened and zone criteria narrowed to ensure capital flows to truly low-income communities (claconnect.com).
Why it matters: Making OZ incentives permanent provides long-term certainty for developers and investors planning projects in underserved areas. Multifamily development has been one of the most popular uses of OZ funds, often creating apartments in urban revitalization zones or rural towns. Now, sponsors can launch new OZ funds and projects well beyond 2026, knowing the tax benefits (deferral of initial gains until at least 2027, and tax-free growth on OZ investments held 10+ years) will continue to be available. The tweaks may also shift where capital goes – with more rural OZ projects likely, we could see increased multifamily investment in smaller communities that were previously overlooked. Overall, the permanence and expansion of OZs “unlock potentially $100B+ for rural and distressed communities” over time (whitehouse.gov), which should spur more multifamily and mixed-use development in those areas.
Gain Rollover into Other Investments: In addition to 1031s and OZs, the bill maintains related gain deferral provisions. For instance, it explicitly “maintains the ability to roll over gains on property sales into Qualified Opportunity Zones and other structures” (like Qualified Replacement Property for certain sales)(nationalmortgageprofessional.com). In short, all the familiar avenues to defer or minimize real estate capital gains tax – 1031 exchanges, OZ funds, and even the much-debated carried interest treatment for real estate fund managers – remain open. (Notably, carried interest taxation was untouched by the law (claconnect.com), meaning real estate private equity and development sponsors can continue to treat promote interests as long-term capital gains in many cases.)
Why it matters for multifamily: The ability to recycle capital without tax drag is essential in real estate. By avoiding any new taxes on exchanges or carried interest, the law keeps the investment ecosystem fluid. Multifamily owners can sell and reinvest into new projects (or refinance and eventually exit via OZ structures) confidently. This liquidity and tax efficiency may help stabilize property values – had 1031s been restricted, many feared a dampening of demand for investment sales. Instead, investors can proceed with acquisitions and dispositions knowing the long-standing tax advantages are secure. It’s a clear win for transaction volume and portfolio strategy flexibility in the CRE world.
Incentives for Affordable & Multifamily Housing Development
The legislation includes targeted measures to support housing development, particularly in the affordable and workforce housing segment. While it doesn’t create new direct grants for homebuyers or renters (no new first-time buyer credits or federal down payment assistance were added) (nationalmortgageprofessional.com), it bolsters tax credit programs and eases certain restrictions to stimulate multifamily construction:
Low-Income Housing Tax Credit (LIHTC) Expansion: The LIHTC, the primary financing tool for affordable rental housing, sees its biggest expansion in 25 years (bisnow.com). The bill permanently increases the allocation of 9% LIHTCs to states by 12.5% (reinstating an enhancement that expired in 2021)(bisnow.com). It also lowers the private-activity bond financing requirement from 50% to 25% for projects to qualify for 4% credits (for bonds issued 2026–2029) (trepp.com) (bisnow.com). Additionally, rural and Native American areas are designated as Difficult Development Areas (DDAs), giving projects in those locations a 30% “basis boost” (i.e. extra tax credits)(bisnow.com). These changes mean more equity financing for affordable multifamily projects and an easier path to make developments pencil out. Industry estimates project over 500,000 new affordable units nationwide from 2026–2029 as a result of the LIHTC reforms (bisnow.com).
Impact: For developers specializing in affordable housing, the larger credit allocations and 4% credit fix are a game-changer. More deals will be financially feasible, especially in areas where obtaining bond volume cap was a bottleneck. The reduced bond threshold effectively allows the same bond dollars to support double the number of projects with 4% credits. The rural boost will push LIHTC developers into underserved rural communities (and tribal lands) with enhanced returns. Multifamily developers may consider partnering with non-profit or housing agencies to tap these credits, even if they typically do market-rate deals, given the increased availability of subsidies. Housing investors and lenders should see an uptick in LIHTC-financed apartment construction, creating opportunities in construction lending, tax credit equity investment, and permanent financing for these projects.
No New Federal Housing Grants (But Some Cuts): The bill does not introduce the kind of headline-grabbing housing incentives some anticipated – for example, there is no new first-time homebuyer tax credit or federal down payment assistance program in this legislation (nationalmortgageprofessional.com). In fact, it rescinds funding for a few existing housing programs, such as HUD’s Green and Resilient Retrofit Program (which was aimed at energy-efficient upgrades to affordable housing) (nationalmortgageprofessional.com). This means developers and owners of multifamily affordable housing will need to continue relying on state/local grant programs and existing tools for gap financing. The absence of new direct subsidies places greater emphasis on the tax incentives (LIHTC, OZ, etc.) to drive housing development.
Measures to Ease Condo Sales: To address a glut of unsold condo units in certain cities, the law includes new measures to help developers clear out inventory (bisnow.com). While details were not widely publicized, these provisions offer tax relief for condominium developers stuck with unsold units in markets like Miami and Chicago (bisnow.com). This might involve temporary tax-safe harbors or extended timelines for recognizing income on unit sales. The aim is to reduce the financial strain on multifamily developers who built for-sale housing during a high-cost, slow-absorption period. For investors, this could improve the viability of condo conversion projects or spur completion of stalled condo developments, indirectly easing rental supply pressure if some units pivot to rentals. It underscores a theme: the bill seeks to clear obstacles for real estate developers and encourage absorption of existing inventory.
Why it matters for multifamily: Affordable housing investors will find a more favorable environment to build and preserve units, thanks to the LIHTC enhancements. Market-rate multifamily developers, while not receiving direct subsidies, benefit from the overall pro-development stance – fewer tax increases, more certainty, and specific fixes (e.g. condo relief) that improve the real estate climate. Importantly, by improving housing credit availability and investor incentives, the law could attract new capital into multifamily development. Community development funds, tax credit syndicators, and banks (via CRA initiatives) are all expected to increase activity. Multifamily borrowers may find financing slightly easier or cheaper for projects with LIHTCs or in OZs, as these tax benefits enhance project economics and reduce risk for lenders and equity providers (trepp.com). In short, the policy leans into boosting housing supply – especially in underserved areas – which is welcome news for a sector still facing supply-demand imbalances.
Business Interest Deductions and Financing Implications
In a high interest rate environment, how interest expense is treated is crucial for leveraged real estate. The bill delivers relief by loosening a prior tax constraint on interest deductibility:
Relaxed Limit on Business Interest (Section 163(j)): The tax code’s limit on business interest deductions (which generally caps deductions at 30% of adjusted income) will now be calculated on a more lenient basis. The law reinstates the add-back of depreciation and amortization in the 30% limit calculation (switching back to an EBITDA standard) for 2025 and beyond (claconnect.com) (kbkg.com). Under current law, this cap was set to tighten to an EBIT basis (excluding depreciation) for most firms, which would particularly squeeze real estate companies with large non-cash depreciation expenses. By using EBITDA, capital-intensive businesses like property owners can deduct more interest before hitting the limit (kbkg.com). In practical terms, this change “supports…improves access to financing for growth-oriented firms” by ensuring interest write-offs are less restricted (kbkg.com).
Real Estate Trade or Business Exception: Additionally, current-law exceptions that favor real estate remain intact. The bill preserves full interest deductibility for electing real property trades or businesses (at the cost of slower depreciation) (nationalmortgageprofessional.com). Many CRE owners had opted out of 163(j) limits to fully deduct mortgage interest – at the price of using longer depreciation lives and forgoing bonus depreciation on buildings. With the new EBITDA-based rule, fewer multifamily owners may need to elect out, because they can deduct most or all of their interest under the general 30% test. Those who avoid electing out keep the faster cost recovery (27.5-year depreciation and bonus eligibility), effectively getting the best of both: interest deductions and bonus depreciation. This is a significant tax planning win – under prior law, owners of debt-heavy properties were often forced to choose one benefit or the other. Now, many can likely have both, improving after-tax cash flows.
Overall Financing Cost Environment: The bill’s broader fiscal effects have mixed implications for CRE financing. On one hand, by raising the federal debt ceiling $5 trillion and avoiding a debt default, it removed a cloud of uncertainty over capital markets (nationalmortgageprofessional.com). This stability is “vital for investor financing,” helping keep credit flowing in CRE markets and preventing a spike in risk premiums (nationalmortgageprofessional.com). On the other hand, the law’s large deficit-financed tax cuts and spending could contribute to upward pressure on interest rates over time. Economists expect that while deficit expansion may boost GDP and tenant demand modestly, the increased government borrowing and potential inflationary effect will cause the long end of the yield curve to drift up, raising the cost of capital for real estate projects (trepp.com). In essence, cap rates may face upward pressure: any extra NOI generated by economic growth could be offset (and then some) by higher discount rates. Analysts caution that the boost from fiscal stimulus is likely to be outweighed by rising financing costs, which would put downward pressure on property valuations across CRE over the medium (termtrepp.com).
Market Dynamics: In the near term, CRE markets are still digesting the new interest rate regime, and this bill adds another factor to price in. Buyers and sellers may diverge on how much these tax benefits increase value versus how much higher interest rates reduce value. Observers predict a widening bid-ask gap as buyers quickly factor in higher debt costs and sellers cling to values propped up by recent tax wins, potentially leading to stalled deals and prolonged negotiations until a new equilibrium is found (trepp.com). For borrowers, the immediate effect is no new restrictions on interest deductibility (a relief, given earlier proposals considered limitations) and possibly improved credit availability for certain asset classes (e.g. more lending appetite for affordable housing projects due to stronger tax credits) (trepp.com). However, borrowers should also anticipate lenders stress-testing deals at higher interest rates going forward, due in part to the bill’s macro impact. Prudent underwriting will incorporate both the tax savings and the likelihood of somewhat higher debt costs.
Why it matters for multifamily: The ability to fully deduct interest (either via the general rule or real estate exceptions) is essential for highly leveraged multifamily deals. By easing 163(j), the law effectively protects CRE owners from a surprise tax hit on interest in a time of expensive debt. Sponsors can structure deals with greater confidence that interest on loans (including construction and bridge loans common in development or value-add plays) will remain deductible, preserving the tax shield that makes leverage attractive. This keeps the cost of capital lower than it would have been if interest deductions were curtailed. That said, multifamily investors will need to stay mindful of the broader interest rate trend – the fiscal stimulus from tax cuts, while positive for growth, could mean that refinancing and acquisition loans come at higher rates, affecting project feasibility. In summary, the bill gives on the tax side (deductions) but could take away on the interest rate side, so financing strategies may need adjustment (e.g. locking in fixed rates or pursuing alternative financing) to mitigate the latter.
Other Notable Changes Affecting CRE Strategy
Beyond the headline items, the Big Beautiful Bill includes additional provisions and omissions that CRE professionals should note, as they can influence investment strategy, property operations, and long-term planning:
SALT Deduction Cap Relief: The individual State and Local Tax (SALT) deduction cap – which matters to many property investors in high-tax states – was raised from $10,000 to $40,000 for 2025–2029 (after which it gradually phases back down for top earners) (kbkg.com). While still a cap, this higher limit will modestly reduce taxes for high-income investors in states like NY, NJ, and CA, freeing up additional cash that could be reinvested into properties. Moreover, the bill explicitly protects the popular “SALT workaround” in 30+ states (pass-through entity tax elections that let partnerships deduct state taxes at the entity level) (kbkg.com) – a critical win for real estate partnerships and funds, which can continue using those workarounds to circumvent the SALT cap (kbkg.com). Net-net, for many CRE pass-through businesses, most state taxes will remain deductible at the federal level through these mechanisms, improving the after-tax yield of real estate investments held via partnerships or LLCs.
Estate Tax and Generational Assets: Investors planning to pass down real estate holdings received favorable news: the bill raises the lifetime estate/gift tax exemption to $15 million per individual (indexed for inflation, from the current ~$13M level) after 2025 (claconnect.com). This change (coupled with the extension of lower estate tax rates) means family-owned real estate portfolios can transfer far more wealth to the next generation without estate taxes. For example, a family with a $30M multifamily portfolio can potentially avoid estate tax entirely with proper planning. This encourages long-term holds and generational ownership of CRE assets, as the threat of a large estate tax bill forcing sales or breakups is reduced. It protects family farms and businesses, as touted by the bill’s supporters (whitehouse.gov), and similarly protects family-run real estate operations.
No New Taxes on Foreign Investments: A proposed “Section 899” tax that would have imposed retaliatory withholding on foreign investment in U.S. real estate was dropped from the final bill (trepp.com). The CRE industry had lobbied hard against this provision, fearing it would deter billions in cross-border capital flows. Its elimination ensures that foreign investors (including sovereign wealth funds and global institutional investors) will continue to view U.S. real estate favorably without new tax barriers (trepp.com). This is especially relevant for trophy multifamily and commercial projects that often seek international equity or for secondary markets trying to attract foreign capital – the status quo (governed by existing FIRPTA rules) remains, and no new friction is introduced.
Climate and Energy Tax Credit Rollbacks: In a reversal of recent trends, the law terminates or curtails many clean energy and green building incentives that were expanded just a few years ago. Notably, the Section 179D energy-efficient building deduction and the 45L energy-efficient home credit are both slated to end for projects in late 2026kbkg.com. Specifically, 179D (which owners of commercial and multifamily buildings have used to claim deductions for energy-saving improvements) will no longer apply to properties starting construction after June 30, 2026 (kbkg.com). Likewise, the 45L tax credit (up to $5,000 per efficient unit for new homes or apartments) will expire for any residences first sold or leased after June 30, 2026 (kbkg.com). In addition, longer-horizon renewable energy credits (for solar, wind, etc., under Sections 48, 45, 48E, 45Y) are sharply curtailed or phased out by 2027 (kbkg.com).
Impact: Developers with a sustainability focus or ESG mandates will feel the pinch. A planned deduction for green retrofits (expanded 179D) was dropped from the final bill, disappointing owners eyeing upgrades to aging office and multifamily towers to improve efficiency (bisnow.com). The loss of 45L means developers of green multifamily projects (especially low-rise apartments that benefited from the credit) must adjust their pro formas after mid-2026 – essentially, future projects won’t get federal rewards for energy efficiency beyond standard market incentives. This could slightly reduce the financial appeal of high-performance “green” buildings or require seeking alternative incentives (like utility rebates or state credits). Owners in the midst of value-add renovations with solar or HVAC upgrades will likewise see fewer tax benefits going forward. In short, the bill prioritizes traditional development incentives over climate-oriented ones, so CRE firms may recalibrate if they were factoring in those green subsidies. (However, any projects that can commence quickly might still lock in remaining credits before the cutoff dates.) (kbkg.com)
Technical Tweaks – REITs and Loss Deductions: The legislation also includes various technical tax changes that, while not exclusively targeting real estate, have niche effects:
o A tweak to REIT taxation was introduced (details were sparse at release, but it’s drawing scrutiny from tax advisers)(bisnow.com). This could involve how REIT dividends are calculated or taxed, so REIT investors/promoters will want to analyze the fine print to ensure compliance and optimal use of the REIT structure.
o A new cap on casualty loss deductions was added (bisnow.com) . Property owners can normally deduct losses from disasters (fires, floods) that aren’t reimbursed by insurance; a cap might limit this benefit. CRE owners in disaster-prone areas should review their risk management, as very large uncompensated losses may no longer be fully deductible, potentially increasing the net cost of catastrophic events.
o The planned permanent limitation on excess business losses for non-corporate taxpayers (which would bar using large active-pass-through losses to offset other income) was softened or deferred (kbkg.com). This is good for real estate operators who often generate tax losses (through depreciation) that offset other income – the flexibility to use those losses is preserved, at least for now (kbkg.com).
Why it matters for multifamily: These “other changes” underscore that the policy pendulum swung toward traditional real estate incentives and business-friendly provisions, while pulling back on newer climate-related subsidies. For multifamily investors and developers, the big picture is a net positive tax environment: generous depreciation, stable pass-through benefits, and preservation of 1031/QOZ, with relatively few offsets. The reduction of green credits, however, might affect developers in niche segments (e.g. those committed to net-zero buildings or using solar credits) – they may need to seek alternate funding or absorb those costs. Overall, the strategic outlook for CRE players is one of tax certainty and opportunity: the rules of the game (1031s, depreciation, interest deductibility, etc.) are clear and favorable for the foreseeable future. That allows for long-term planning of acquisitions, dispositions, and development pipelines without fear of sudden tax hikes or rule changes. Yet, the economic context – higher federal debt and potential interest rate impacts – means prudent investors will also factor in more conservative financing assumptions even as they take advantage of the new tax breaks.
Conclusion: Strategic Considerations for CRE Stakeholders
For CRE investors, developers, and borrowers – particularly in multifamily – the One Big Beautiful Bill Act brings a mixture of tailwinds and considerations for strategy:
Tax Tailwinds: The law “unleashes” a suite of tax incentives geared toward property investment and development (trepp.com), offering perhaps the most supportive tax landscape in years for real estate. Investors should capitalize on the near-term tax-saving opportunities (e.g. bonus depreciation, Section 179 expensing) to improve project economics and reinvest tax savings. Making the QBI deduction and lower business rates permanent provides long-range clarity, allowing CRE business owners to structure deals for maximum tax efficiency (pass-through entities, cost segregation, like-kind exchanges, etc.) without an expiration cliff. In short, many provisions “directly benefit real estate investors and landlords”, from 20% pass-through deductions to interest write-offs to 1031 continuity (nationalmortgageprofessional.com). Stakeholders should work with tax advisors to ensure they are fully leveraging these incentives – for example, adjusting depreciation methods, reconsidering 163(j) opt-out elections, or timing asset purchases to qualify for expensing.
Investment & Development Strategy: With Opportunity Zones extended and LIHTCs expanded, there are fresh avenues to raise capital and target projects in affordable housing and emerging communities. Developers may find new life in deals that were marginal, now that tax credits or expensing can tip the scales. Multifamily developers in particular should look at whether incorporating affordable units or pursuing projects in qualified areas could unlock new financing (via OZ funds or LIHTC equity). The bill’s emphasis on domestic manufacturing and infrastructure (e.g. factory expensing, defense spending) may also spur local economic growth and housing demand in certain markets – CRE investors might track where new factories or military investments are occurring, as those areas could see a need for more housing and services. Conversely, the rollback of energy incentives means those prioritizing green building may seek state/local programs to fill the gap or accept that ROI on sustainability upgrades could shrink. Each firm should evaluate its pipeline under the new rules, possibly accelerating projects to grab incentives (e.g. complete green developments by mid-2026) or refocusing on asset classes and locations most favored by the policy changes.
Financing and Risk Management: Borrowers and lenders face a dynamic landscape. Tax-wise, the ability to deduct interest and the avoidance of a debt ceiling crisis support a healthier financing environment (nationalmortgageprofessional.com). However, prudent risk management is key as interest rates may rise gradually in response to the expansive fiscal policy (trepp.com). CRE borrowers should consider locking in fixed rates or interest rate hedges and be prepared for stricter underwriting as lenders account for potential rate increases. Cap rate forecasts might need upward revision, affecting how much one should pay for assets today. Investors might also encounter a short-term “valuation gap” until sellers incorporate the new reality of higher borrowing costs despite the tax benefits (trepp.com). It’s important not to “mistake fiscal fireworks for relief” on all fronts – the tax changes are helpful, but they don’t erase fundamentals (trepp.com). Sound investment decisions will balance the tax-driven boost to cash flows against the market-driven cost of capital changes.
In summary, the Big Beautiful Bill delivers a host of pro-CRE measures that will particularly aid the multifamily sector in project feasibility, cash flow, and investment returns. It “locks in favorable tax treatment for…developers and investors”, providing much-needed stability and certainty in areas like bonus depreciation, QBI, and 1031 exchanges (nationalmortgageprofessional.com). CRE professionals – from syndicators assembling their next apartment deal to REITs managing portfolios – should update their tax and financial models to seize these benefits. At the same time, they must remain vigilant to broader economic shifts the law may bring. By doing so, investors, developers, and borrowers can navigate this new era to their advantage, leveraging the bill’s provisions to finance and build the next generation of commercial and multifamily projects, even as they adapt to an evolving market landscape.
White House Fact Sheet – President Trump’s One Big Beautiful Bill… (June 24, 2025)
Trepp, Senate’s “One Big Beautiful Bill”: CRE Tax Wins Clouded by Rising Rate Pressures (July 2, 2025)
CLA (CliftonLarsonAllen) Insights, Proposed One Big Beautiful Bill May Impact Real Estate (May 19, 2025)
National Mortgage Professional, Trump Signs Big Beautiful Bill – What It Means for Mortgage and Housing (July 2025)
Commercial Observer, Big Winner in Trump’s Big, Beautiful Bill? CRE Bonus Depreciation (July 2, 2025)
Bisnow, One Big Beautiful Bill’s Passage Launches New Tax Era for CRE (July 2025)
Bisnow, Proposed LIHTC Reform Renews Optimism For Crucial Program (May 15, 2025)
KBKG Tax Insights, House Passes Tax Bill…Details Inside (July 3, 2025)
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